Policy Forms Online

Policy Forms Online

2015 ALTA Policy Forms Year in Review

The ALTA® Board of Governors considered many recommendations from the ALTA Forms Committee during 2015.

As always, the forms have been developed by the ALTA Forms Committee and approved by the ALTA Board. An opportunity to review and comment is extended to ALTA Members and industry customers before final publication. The forms, in general, are made available for customer convenience. The parties are free in each case to agree to different terms, and the use of these forms is voluntary, unless required by law.

There is a market need for alternative ALTA Expanded Coverage Residential Loan Policies, since the existing ALTA Expanded Coverage Residential Loan Policy incorporates bracketed choices for the ALTA Endorsements 4-06 and 4.1-06, 5-06 and 5.1-06, but only provides for the automatic incorporation of the ALTA Endorsement 9-06. The market would be better served by providing clear forms that do not depend on bracketed selections for the benefit of the customer. With that need of the marketplace in mind, the ALTA Forms Committee recommended the adoption of the ALTA Expanded Coverage Residential Loan Policy – Current Assessments, which incorporates ALTA Endorsements 4.1-06, 5.1-06, and 9.10-06, to provide insurance with respect to assessments that are due and unpaid at Date of Policy or violations of Covenants at Date of Policy.

The ALTA Forms Committee also recommended adoption of the ALTA Short Form Expanded Coverage Residential Loan Policy – Current Assessments, which incorporates the ALTA Expanded Coverage Residential Loan Policy – Current Assessments and the same ALTA Endorsements 4.1-06, 5.1-06, and 9.10-06. The ALTA Short Form Expanded Coverage Residential Loan Policy – Current Assessments includes a modified Schedule B, item 2 to provide consistent coverage for covenants, conditions, and restrictions with respect to assessments due and unpaid at Date of Policy.

The ALTA Forms Committee additionally recommended adoption of ALTA Endorsement 9.6.1-06 (Private Rights – Current Assessments – Loan Policy). The existing ALTA Endorsement 9.6-06 insures against loss or damage "if enforcement of a Private Right in a Covenant affecting the Title at Date of Policy (a) results in the invalidity, unenforceability or lack of priority of the lien of the Insured Mortgage, or (b) causes a loss of the Insured's Title acquired in satisfaction or partial satisfaction of the Indebtedness." A "Private Right" includes a private charge or assessment. The ALTA Endorsement 9.6.1-06 differs in that it insures as to "a private charge or assessment due and payable at Date of Policy." This is consistent with the existing ALTA 4.1-06 (Condominium), 5.1-06 (Planned Unit Development), and 9.10-06 (Restrictions, Encroachments, Minerals --- Current Violations – Loan Policy).

There is a market need for alternative ALTA Expanded Coverage Residential Loan Policies, since the current ALTA Expanded Coverage Residential Loan Policy incorporates bracketed choices for the ALTA Endorsements 4-06 and 4.1-06, 5-06 and 5.1-06, but only provides for the automatic incorporation of the ALTA Endorsement 9-06. The market would be better served by providing clear forms that do not depend on bracketed selections for the benefit of the customer. With that need of the marketplace in mind, the ALTA Forms Committee recommended the adoption of the ALTA Expanded Coverage Residential Loan Policy – Assessments Priority, which incorporates ALTA Endorsements 4-06, 5-06, and 9-06, to provide insurance with respect to the priority of the Insured Mortgage over assessment liens before foreclosure.

The ALTA Forms Committee also recommended adoption of the ALTA Short Form Expanded Coverage Residential Loan Policy – Assessments Priority, which would incorporate the ALTA Expanded Coverage Residential Loan Policy – Assessments Priority and the same ALTA Endorsements 4-06, 5-06, and 9-06.

ALTA Short Form Residential Loan Policy - Current Violations – New Form

There is a market need for an alternative ALTA Short Form Residential Loan Policy, since the current ALTA Short Form Residential Loan Policy includes options for the ALTA Endorsements 4-06 and 4.1-06, 5-06 and 5.1-06, and the ALTA Endorsement 9-06, but does not provide an option for ALTA Endorsement 9.10-06. With that need of the marketplace in mind, the ALTA Forms Committee recommended the adoption of the ALTA Short Form Residential Loan Policy – Current Violations, which includes the optional selection of ALTA Endorsements 4.1-06, 5.1-06, and 9.10-06, and which provides insurance in Schedule B, item 2(c) with respect to:

"the invalidation, subordination, or other impairment of the lien of the Insured Mortgage because of a violation at Date of Policy of any provisions in those covenants, conditions, or restrictions, including those relating to environmental protection."

ALTA Endorsement 19.2-06 (Contiguity - Specified Parcels) – New Form

The existing ALTA Contiguity Endorsements generally call for reference to a specific call or boundary for insurance of contiguity, and this approach can be burdensome because of the number of parcels or irregularity of boundary descriptions. There are existing non-ALTA forms that provide more flexibility in insuring contiguity, and the adoption of such an approach enhances the ability of customers to secure the coverage they desire on commercial transactions.

Consequently, the ALTA Forms Committee recommended the adoption of ALTA Endorsement 19.2-06 (Contiguity – Specified Parcels), which calls only for reference to parcels that are insured as contiguous and to the applicable survey, by providing:

The Company insures against loss or damage sustained by the Insured by reason of there being any gaps, strips, or gores lying within or between [Example: Parcel A, B, C or Tract 1, 2, 3] of the Land[ except as depicted on the survey made by ____________________ dated _____________________, and designated Job No. ____________].

ALTA Endorsement 28.3-06 (Encroachments - Boundaries and Easements - Described Improvements and Land) – New Form

The ALTA Forms Committee recommended adoption of the ALTA Endorsement 28.3-06 (Encroachments – Boundaries and Easements – Described Improvements and Land Under Development). The adoption of a new ALTA Endorsement 28.3-06 provides a uniform, predictable form that would satisfy existing demand for coverage that is consistent with other Land Under Development Endorsements.

This endorsement will insure against loss "by reason of

An encroachment of any Improvement or Future Improvement located on the Land onto adjoining land or onto that portion of the Land subject to an easement, unless an exception in Schedule B of the policy identifies the encroachment;

An encroachment of any Improvement located on adjoining land onto the Land at Date of Policy, unless an exception in Schedule B of the policy identifies the encroachment;

Enforced removal of any Improvement or Future Improvement as a result of an encroachment by the Improvement or Future Improvement onto any portion of the Land subject to any easement; or

Enforced removal of any Improvement or Future Improvement located on the Land that encroaches onto adjoining land."

ALTA Notice of Availability of Owner's Title Insurance – Revised Form

The ALTA Forms Committee recommended the proposed Notice of Availability of Owner's Title Insurance for One-to-Four Family Residential Property. This Notice includes the following explanations:

matters that would be covered by an Owner's Policy and the valuable duty to defend an insured,

the distinction between a title insurance commitment and a representation of title,

the option to buy a Homeowner's Policy of Title Insurance (where applicable),

the ability to request a sample Owner's Policy,

(optional) quote as to the cost of an Owner's Policy, and

election to buy or decline an Owner's Policy or Homeowner's Title Policy (where applicable) and signature by the purchaser.

Actions of the ALTA Board of Governors on June 19, 2015

ALTA Endorsement 46-06 (Option) – New Form

A real estate option is a written agreement or contract giving the holder of the option the right, but not the obligation, to acquire an interest in real property for an agreed upon price and within a certain time frame. Unlike a more standard contract to purchase or lease real estate, an option is unilateral in the sense that it obligates the optionor granting the option to convey the real property interest. In exchange, the optionor receives consideration in the form of the option price, usually some fraction of the agreed upon acquisition price.

In some states the right arising from the option is considered a real property interest. In other states, however, the option creates a contract right; and in some cases an unexercised option may be considered a mere expectancy. While the legal status given to options varies widely among different jurisdictions, there is nevertheless a desire in the marketplace for a standard Option Endorsement.

There is a market need for an endorsement that provides basic coverage to the Insured for loss resulting from certain risks associated with an option. The endorsement can be used in situations where the Insured named in a policy is also the holder of a specific Option identified in the endorsement.

Since this is a national form and state laws vary in their treatment of option rights, the risks insured against by this endorsement are limited in scope. The endorsement insures against loss or damage sustained by the Insured resulting from any defect in the execution of the Option resulting from either: (i) forgery, incompetency, incapacity or impersonation of the Optionor (the grantor of the Option identified in the endorsement); (ii) failure of the Optionor to have authorized the Option; or (iii) the Option not being properly acknowledged, notarized or delivered by the Optionor. The endorsement also insures against loss resulting from any right to acquire an estate or interest in the specified Option Parcel granted to another person in a document recorded in the Public Records at Date of Policy, if that document is not excepted on Schedule B.

The endorsement does not cover losses resulting from the invalidity or unenforceability of the Option, unless that invalidity or unenforceability results from a defect in the execution of the Option. The endorsement also specifically excludes loss caused by either the failure of the Insured to fulfill the terms and conditions of the Option, or the unenforceability, avoidance or rejection of the Option under bankruptcy and creditors' rights laws. The endorsement also excludes loss or damage resulting from the failure of the Option to impart constructive notice, except to the extent that failure results from the Option not being properly signed, witnessed, sealed, acknowledged, notarized or delivered by the Optionor.

The market will benefit from having an ALTA approved endorsement form that will be appropriate for use in the majority of states regardless of whether the Option creates a real property interest, a binding contract or something less.

Actions of the ALTA Board of Governors on October 8, 2015

ALTA Closing Protection Letter – Single Transaction – Revised Form

ALTA Closing Protection Letter – Multiple Transactions – Revised Form

With the implementation of the new Closing Disclosure under the TILA-RESPA Integrated Disclosure Rule, it is necessary to revise the ALTA Closing Protection Letter – Single Transaction (04-02-14) and the ALTA Closing Protection Letter – Multiple Transactions (04-02-14) to conform to changes in the law and to modify existing language in the closing protection letters for consistency and clarity. Those changes include:

A new heading of "Requirements" for the introductory section

Clarification that the assignee of the Insured Mortgage must be an assignee for value with Knowledge

Clarification that the coverage relating to defects, liens, encumbrances or other matters in connection with the transaction is provided to the extent afforded in the Policy

Consistent with the 2011 and earlier CPLs, recognition that there is no obligation to determine the validity, enforceability, or effectiveness of a document, except to the extent the policy coverage applies

Recognition that the exclusions for particular laws includes the failure of the Issuing Agent or Approved Attorney to comply with closing instructions relating to those laws

As provided in prior letters, acknowledgment that the Company is liable only to the holder of the Indebtedness at the time payment is made.

Cooperation requirements applicable to the Addressee.

Recital that the letter may not be modified by the Issuing Agent or Approved Attorney.

ALTA Endorsement 2-06 Truth in Lending – Decertified Form

The ALTA Endorsement 2-06 Truth in Lending is decertified effective 12-01-2015. This means that the Endorsement is no longer a part of the currently published collection of ALTA Forms. Companies may continue to use the Endorsement as previously published.

The Boards of ALTA and NSPS approved revisions to the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. The revised standard will become effective February 23, 2016.

Questions? Comments?

All of the forms may be accessed on the ALTA Website, Policy Forms Online, at www.alta.org/policy-forms. If you have comments or concerns, please forward them to the staff liaison for the Forms Committee, Kelly Romeo, at kromeo@alta.org.